Going global with bonds: The benefits of a more global fixed income allocation

25 June 2018 | Portfolio construction


 Research paper
Graphic with basic pie charts

When an investor allocates more of their portfolio to global bonds, they gain exposure to a greater number of securities, inflation and economic environments, and cycles from a wider range of markets beyond their borders.

The added diversity can reduce the risk of an investor's fixed income portfolio, without necessarily decreasing the expected returns.

Our latest research analyzes data from Canada, the United States, the United Kingdom, the euro area and Australia. We find that the diversification benefits can be achieved across all of these markets, with one critical qualifier: The key to the diversification potential of global bonds is to hedge the currency exposure back into the investor's local currency.